But this is no marginal company. It is one of the leading makers of lift trucks in the world, with 25% of the U.S. market and 8% worldwide. Over the past four quarters, it took in $2.5 billion in revenue and earnings of $82 million, or $4.86 a share.

The newly independent company will be able to allocate its free cash flow—an expected $70 million-plus annually over the next few years—toward expanding the company and paying a dividend. And Hyster's shares give the company a new currency for acquisitions.

As management streamlines operations, making it more competitive, and as it lays out plans for the future, it could shake off its 20% discount to peers, including
Cascade
(CASC) and
Columbus McKinnon cmco -1.2318029115341544%Columbus McKinnon Corp.U.S.: NasdaqUSD26.46
-0.33-1.2318029115341544%
/Date(1425420000189-0600)/
Volume (Delayed 15m)
:
42755AFTER HOURSUSD26.46
%
Volume (Delayed 15m)
:
275
P/E Ratio
15.564705882352941Market Cap
535210655.45929
Dividend Yield
0.6046863189720333% Rev. per Employee
400778More quote details and news »cmcoinYour ValueYour ChangeShort position
(CMCO). The shares closed Friday at $39.51, for a price/earnings ratio of eight times trailing 12-month earnings. Over the next 18 months, they could climb 25% or more.

HYSTER GOT ITS START AS a maker of winches and lifting machines for the timber industry in 1929, expanding into forklifts five years later. Yale entered the forklift business in 1950. NACCO bought both in the 1980s and combined them. Hyster-Yale focuses on high-end electric and internal-combustion-engine forklifts used on construction sites, in warehouses, and on factory floors.

The company gets 80% of its revenue from new-forklift sales. The balance comes from aftermarket sales and services for its installed base of 785,000 Hyster and Yale forklifts, providing a steady stream of high-margin revenue in a highly cyclical business.

In 2009, revenue fell nearly in half, as customers canceled orders. Sales have since rebounded. In the company's prospectus, management guided for unit shipments and parts volumes to rise slightly in the second half of 2012.

HYSTER'S MANAGEMENT TEAM remains intact, with Alfred Rankin, chairman of NACCO since 1994, taking that role at the spinoff, as well. CEO Michael Brogan has headed the Hyster-Yale operating division since 2006. Top executives and board members own 24% of the company, so their interests are clearly aligned with those of other shareholders.

Management intends to expand its product lines to increase market share. Such efforts have already begun. Hyster has traditionally been strong at the high end of the market, but for the past few years, the company has been developing a range of lower-priced products aimed at developing markets.

One such product, the Utilev, a lift truck powered by an internal-combustion engine, is being built by an independent manufacturer in China using Hyster-Yale's design, an arrangement that lowers its unit cost. Acquisitions will also be part of the growth strategy.

Hyster-Yale Materials Handling

Recent Price

$39.51

52-Week Range

$43.75 - $37.68

Shares Outstanding

16.8 mil

Market Value

$664 mil

TTM Revenue

$2.54 bil

TTM Net Income

$82 mil

TTM EPS

$4.86

TTM P/E

8

TTM=Trailing 12 months Sources: Bloomberg; company reports

With just 40% of revenue coming from outside the U.S., Hyster has ample room to expand in overseas markets, particularly in emerging economies.

A substantial opportunity exists for margin expansion, as well. In the June quarter, operating margins were 4.1%. That's well below average margins at competitors of 6.6%. Management feels that 7% operating margins are possible as it expands its product offerings.

THE COMPANY HAS A SOLID balance sheet, with $143.1 million in cash to $142.6 million in debt. Robert McCarthy of Robert W. Baird, the lone analyst on Wall Street covering the company, thinks it could initiate a $1-a-share annual dividend next year, for a 2.5% yield, in line with other machinery companies.

A dividend announcement or an acquisition could be a catalyst for the shares.

McCarthy forecasts earnings will come in at $4.40 a share this year on slightly lower sales. Though volumes are rising, the sales mix may be weaker. He expects earnings to fall to $4.20 next year before rebounding to $5 a share in 2014.

At 10 times that estimate, the stock could be worth $50. And even if earnings slip in the near term, expect Hyster-Yale's free cash flow to remain strong, providing plenty of flexibility for the company to grow.